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Businesses in military towns brace for budget hit

In this Monday, March 4, 2013 photo, salesman Donnie Alford talks on the phone in his office at Auto Express in Fayetteville, N.C. The auto and wheels business is located on Yadkin Road, near a main entrance to Fort Bragg military base. More than 8,500 civilian employees on the base will be furloughed one day a week starting in late April, the equivalent of a 20-percent pay cut, possibly affecting small businesses near the base. (AP Photo/Gerry Broome)

FAYETTEVILLE, N.C. (AP) — Like many who make their living in the commercial strip outside the gates of Fort Bragg, Mike Thomas is confident the $85 billion in automatic military spending cuts will hurt sales at his used car lot and rim shop.

The vast majority of his customers work on the base, and smaller paychecks means less money for the four-wheel drive Jeeps, chrome wheels and window-rattling sound systems that are his specialty.

While it remains too soon to measure the exact impact for small businesses that thrive on the civilians employed at the nation's largest military posts, owners already are bracing for the damage. Pentagon officials say the automatic budget cuts that took effect March 1 will result in one-day-a-week furloughs for 800,000 civilian employees across the U.S. starting next month, resulting in a 20 percent cut to their paychecks. Soldiers' salaries are exempt from the cuts.

About 14,500 of those are at Fort Bragg, the sprawling U.S. Army base outside Fayetteville, N.C., where the commanding general on Friday announced additional cuts that include the closure of a dining hall and selected recreation centers that serve soldiers and their families. About 38 percent of all economic activity in the surrounding county is tied directly to military spending, a total impact of about $5.5 billion a year.

Hand-painted signs at Auto Express, the shop about a half-mile from the base's main gates where Thomas is the general manager, offer special discounts and financing for U.S. Defense Department employees.

In addition to the budget cuts — known as sequestration — deadlock in Congress could trigger a full federal shutdown later this month. Thomas expects the cuts will have an impact on his business similar to the military buildup before the 2003 invasion in Iraq, when sales dropped by about half as Bragg's 82nd Airborne deployed overseas.

"Our business is about 90 percent military," he said. "This is a military town. It is going to affect us all. When there's a cut, people are scared to spend. I've yet to speak to anybody who thinks this is a good idea."

She already offers a 15 percent military discount and offers a $10 men's haircut each Tuesday. But Ward said she can't afford to lower prices further, although she knows folks will go without or cut back on luxury items and services first during tough economic times.

"They will stop coming in as much or won't have as much done at the salon in one visit," said Ward, the owner of Crazy Beautiful Salon. "And moms tell us, 'Take it shorter' for their boys because they can't afford to have it cut as often."

In addition to the employee furloughs, Pentagon officials are also weighing cuts to military contracts, training, construction and maintenance.

Alabama's Fort Rucker is the Army's primary base for training helicopter pilots. With 5,850 military personnel and another 6,328 contractors, the massive base is the economic hub for three cities outside its gates: Enterprise, Daleville and Ozark.

Susy Guzman said she already is seeing the effects of budget uncertainty reflected in fewer diners at Brasas Brazil, her family restaurant in Enterprise. The business is popular with military contractors who work as flight instructors, helicopter mechanics, maintenance workers and administrators.

"You can tell people are being cautious because there is uncertainty, they are wondering if their wallets are going to be affected," Guzman said. "It will be a snowball effect here ... first the smaller businesses, like restaurants, but then it just grows."

Guzman also owns Wings Aviation Products in nearby Daleville, a store that sells flight supplies, sunglasses and clothes to aviators and their families. She fears any cutback in flight training time could result in a downturn in revenue because nearly all the store's sales are linked to Army aviation.

Compounding her family's worries is the fact that Guzman's husband is a contract flight instructor who is facing the loss of nearly one month's salary a year.

"It hits us both ways, both from our businesses and our family income," she said.

There are those looking on the bright side, however. Slimmer government paychecks could send more people looking for quick cash to pawn shops and payday loan businesses.

At the Advance Till Payday cash advance store in Oak Grove, Ky., manger Judy Backlund gets a lot of her business from nearby Fort Campbell. The Army prohibits soldiers from using the short-term, high-interest loans, but she deals with plenty of civilians and contractors who work at the post.

Backlund said she's already getting calls from people who are worried about stretching their salaries if they are furloughed. Cash advance stores have been criticized for their high fees and interest rates, though the industry has said it's a necessary option for people who can't get a personal loan from traditional banks.

"It's not an answer to all your problems, but it's better than nothing," she said. "Most people are living paycheck to paycheck, and not much is going into savings."

One of her employees, 33-year-old Vanessa Nohelty, is the wife of a Fort Campbell soldier. Although military salaries are exempt from the budget cuts, Nohelty said the cuts could threaten many of the family programs and services on which spouses rely.

Nohelty said she is waiting to hear from the leaders at Fort Campbell about the effect on childcare, sports programs and counselors that help soldiers after they return from deployment.

"Are we going to get to keep all those programs?" she questioned. "Are they going to have as many counselors?"

Link Melley is the co-owner of Norfolk, Va.-based Freedom Furniture and Electronics, which operates 15 stores in military markets, including outside Fort Campbell. In business for 30 years, Melley said military customers account for 90 percent of the company's business. Many of his 220 employees are military spouses and veterans.

He said the anticipation of these budget cuts has led to a downturn in sales for more than a year. He worries he may have to reduce his staff.

"Typically when there is a deployment, the stress and anxiety is just at one base," he said. "This has been across the board, every service, every base in the country. ... I have never ever seen the anxiety level this high."

Beyond the immediate cuts, Melley said the uncertainty surrounding the constant political wrangling in Washington makes it hard to plan for the future.

"Frankly, we didn't expect sequestration to take place," Melley said. "The service members and their families have become the pawn, and Congress and the president need to get this figured out."